Corporate Governance and Investment in East Asian Firms: Empirical Analysis of Family-Controlled Firms
AbstractIn this paper, we analyze in quantitative terms the influence of family control on the pattern of corporate investment, using firm-level data from Indonesia, Korea, Malaysia, the Philippines, and Thailand to regress the investment function and focusing on the family ownership structure that characterizes East Asian corporate governance. Our results present evidence that family-controlled firms, the majority of the firms in our data set, face more severe internal financing constraints than non-family-controlled firms. Our findings suggest that the mechanism in East Asian countries, which is commonly assumed to permit smooth reallocation of money among investment projects through the internal capital markets of family-controlled group firms, does not work well, and that, coupled with the difficulty of obtaining financing from external capital markets, it my lead to strict internal financing constraints on investment.
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Bibliographic InfoPaper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2006-12.
Length: 40 p.
Date of creation: Oct 2006
Date of revision:
Family-controlled firm; Corporate Investment; Asian crisis;
Find related papers by JEL classification:
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-08-18 (All new papers)
- NEP-BEC-2007-08-18 (Business Economics)
- NEP-CFN-2007-08-18 (Corporate Finance)
- NEP-MAC-2007-08-18 (Macroeconomics)
- NEP-SEA-2007-08-18 (South East Asia)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988.
"Financing Constraints and Corporate Investment,"
Brookings Papers on Economic Activity,
Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
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